Ranbaxy‘s March Quarter Net Plunges 90%

Pharma major Ranbaxy has reported its net profit for the March 2013 quarter at Rs 131 crore, down 90% from that of Rs 1260 crore a year earlier. Its topline has also witnessed a drop of 34% to Rs 2439 crore. These numbers are not very encouraging for investors.

The reason for the drop lies in the ending of the 180-day exclusivity of the company’s generic of Atorvastatin last year. The company garnered huge revenues from this product, which created a high base in the March 2012 quarter. With both these factors put together, it is no wonder that the company has seen lower revenues during the quarter.

In the same period, Ranbaxy’s domestic revenues grew by 11% to Rs 561 crore. In the last quarter, the domestic revenues grew by just 8%, and the Q4 numbers indicate that the company is recovering in the domestic market. Its revenues in the exports markets, however, slid sharply by 41%, with the Atorvastatin generic playing spoilsport. While the US revenues have seen a decline, revenues in Europe have shown a growth of over 15% and those from Africa have grown by 23% on a year-on-year basis.

On the costs side, the company has borne the brunt of a 32% rise in material costs. Inventories and stock in trade have also declined by 21%. The employee cost has remained flat, while depreciation expenses have declined marginally. Claims and contractual expenses, which stood at Rs 965 crore in the March 2012 quarter, have come down to just Rs 2 crore. This has saved the company huge costs in the period, which has helped it to save its margins by more than 400 basis points. The EBITDA margins have come in at 6.35% compared to 2% in the December 2012 quarter. The margins, however, are steeply down in the March quarter compared to 29.5% reported a year ago.

On the non-operating side, the financial expenses rose from Rs 18.6 crore a year ago to Rs 52.5 crore. However, the forex gains of Rs 81 crore for the quarter are 76% down from that of Rs 344 crore in the corresponding period last year. The company has paid taxes of Rs 35 crore, which were lower compared to the year ago figures, but the effective tax rate stands higher at 21% against 10%.

The Q1 bottomline of the company (Ranbaxy follows January-December as its financial year) has lagged behind the street’s estimates of Rs 141 crore. Though there is a drop in the net profit, the recovery in the domestic business is something that will not go unnoticed. The further growth of the company, however, depends on the management’s commentary on its future plans. The US base business revenues have also grown in double digits. Ranbaxy, however, has not reported any particular numbers of growth, neither has it commented on its product pipeline. We consider that the stock may remain volatile as the company lags a solid future outlook.